International Media Watch of news headlines and current affairs reports about Romania

Wednesday, October 26, 2011

Romania needs to open energy markets, say investors

* Investors, officials say Romania needs to stop capping prices

* Outdated power sector urgently needs more money

Oct 26 (Reuters) - Romania needs to open up its gas and electricity markets and stop capping prices if it wants to attract badly needed investment to its power generation sector, foreign officials and investors said on Wednesday.

Energy investors and the European Commission, which requires member states to align its energy prices with EU levels over a number of years, have repeatedly criticised Romania for capping prices, saying it hurts competition and deters investment.

"Steps have been taken that show trust can be regained for investors to do business in Romania, but we need further signs," Frank Hajdinjak, the head of the Romanian unit of German utility group E.ON (EONGn.DE), told an energy seminar.

Under a 5 billion euro ($6.9 billion) aid package led by the International Monetary Fund, Romania has pledged to liberalise its gas and electricity markets in stages by 2015.

The government must now produce a timetable of electricity and gas price hikes for industrial consumers from this year to 2013 and for households from 2013 to 2015.

E.ON, which owns local gas and power distributors, has repeatedly complained about Romania's policy to cap tariffs.

"We (energy investors) are not poker players, but we have to have a reasonable return on our investment," Hajdinjak said.

Luca D'Agnese, the country manager for Enel , said Romania needed to ensure competition and transparency in the power generation market to attract investment.

"Market prices are below their investment level," D'Agnese said. "Everyone could get a price set by the regulator, but on the other hand these prices are not cost-reflective."

A draft energy strategy by the economy ministry estimated Romania needs 30-40 billion euros of investment in new electricity generation, while it is forced to close a third of its outdated power capacity by 2020 and more than half by 2035.

"(American investors) are obviously going to be interested in a liberalised market," U.S. ambassador Mark Gitenstein said at the same seminar. "You cannot attract the investment needed here without it, absolutely not." ($1 = 0.719 Euros) (Reporting by Luiza Ilie, editing by Jane Baird)